Mondo Cult Inc. is considering acquiring pulpless.com. If the unleveraged discount rate appropriate for the

acquisition is 0.14 and pulpless is estimated to generate the following incremental cash flows to Mondo, what is the value of pulpless’s operations to Mondo?

Year 1 2 3 4

Free Cash Flow $2 $2 $2 $6

Unlevered horizon value 39

Tax Shield 1 1 1 4

Horizon value of tax shield 6

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